FICC Focus All Options Considered: Middle East Conflict, What Markets Are Missing
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Mar 4, 2026 Anoush Ehteshami, a Durham University professor who has studied Iran and the region for decades, walks through Iran's strategic mindset and institutional resilience. He discusses proxy capabilities, succession dynamics, and how different actors weigh escalation. The conversation also covers how oil, cross-asset volatility, and safe-haven flows reflect market perceptions after recent attacks.
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Options Show Longer Dated Oil Upside Risk
- Oil option markets show extended upside risk as call skew moved into longer-dated maturities after the attacks.
- Tanvir Sandhu notes producers monetise rich upside skew by selling calls and buying downside puts, signalling longer-duration price risk priced in.
Positioning Makes Market Risk Asymmetric
- Cross-asset volatility rose asymmetrically with heavy demand for protection but markets are cautious, not positioned for sustained volatility.
- Tanvir warns high equity holdings and low cash mean positioning could amplify downside if the conflict persists.
Duration Of Oil Shock Drives Rates Path
- Rates pricing depends on whether energy-driven inflation is sustained enough to change central bank policy paths.
- Tanvir highlights a prior removal of hike premium and that bond sell-off reflects concerns about persistent energy pass-through to inflation.